Minnesota Residential PACE Administrator Bond: A Comprehensive Guide
June 29, 2021
This guide provides information for insurance agents to help their customers obtain Minnesota Residential PACE Administrator Bonds
At a Glance:
- Average Cost: Between 1.5% to 7.5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Based on the yearly dollar amount of residential PACE loans administered:
Table 1.1
| PACE Loans Administered | Bond Amount |
|---|---|
| $0 to $5 million | $100,000 |
| Over $5 million to $10 million | $125,000 |
| Over $10 million to $25 million | $150,000 |
| Over $25 million | $250,000 |
- Who Needs it: All administrators of residential PACE loans operating in Minnesota
- Purpose: To ensure the public will receive compensation for any damages should the PACE administrator fail to comply with licensing law
- Who Regulates Residential PACE Administrators in Minnesota: The Minnesota Department of Commerce
Background
Minnesota statute 216C.437 requires all residential PACE administrators operating in the state to obtain a license with the Department of Commerce. The Minnesota legislature enacted the licensing laws and regulations to ensure that residential PACE administrators engage in ethical business practices. In order to provide financial security for the enforcement of the licensing law, residential PACE administrators must purchase and maintain a surety bond to be eligible for licensure.
What is the Purpose of the Minnesota Residential PACE Administrator Bond?
Minnesota requires residential PACE administrators to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the PACE administrator fails to comply with the regulations set forth in Minnesota statutes 216C.01-50. Specifically, the bond protects the public in the event the PACE administrator breaches any contracts or fails to pay all required taxes and fees. In short, the bond is a type of insurance that protects the public if the PACE administrator breaks licensing laws.
How Can an Insurance Agent Obtain a Minnesota Residential PACE Administrator Surety Bond?
BondExchange makes obtaining a Minnesota Residential PACE Administrator Bond easy. Simply login to your account and use our keyword search to find the “PACE” bond in our database. Don’t have a login? Enroll now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone (800) 438-1162, email or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
Is a Credit Check Required for the Minnesota Residential PACE Administrator Bond?
Surety companies will run a credit check on the owner’s of the lending company to determine eligibility and pricing for the Minnesota Residential PACE Administrator bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Minnesota Residential PACE Administrator Bond Cost?
The Minnesota Residential PACE Administrator bond can cost anywhere between 1.5% to 7.5% of the bond amount per year. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the approximate bond cost on a $100,000 bond requirement.
$100,000 Residential PACE Administrator Bond Cost
Table 1.2
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $1,500 |
| 650 – 799 | $2,000 |
| 600 – 649 | $4,000 |
| 550 – 599 | $7,500 |
What is a PACE Loan?
PACE stands for Property Assessed Clean Energy Programs, and a PACE loan provides financing for homeowners seeking to make their home more energy efficient. For example, a homeowner may apply for a PACE loan when replacing their water heater or installing solar panels on their roof.
How Does Minnesota Define “Residential PACE Administrator?”
Minnesota statute 216C.435 defines a residential PACE administrator as any business entity who provides one or more of the following services:
- Markets, offers, sells, facilitates, or finances, in whole or in part, a residential PACE loan
- Facilitates, arranges, or contracts for the installation of the cost-effective energy improvements financed through a residential PACE loan
- Offers any other service to an implementing entity in connection with the offering or provision of a residential PACE loan or operates a residential PACE program
How do PACE Administrators Apply for a License in Minnesota?
PACE administrators in Minnesota must navigate several steps to secure their license. Below are the general guidelines, but applicants should refer to the NMLS’s application guidelines for details on the process.
License Period – The Minnesota Residential PACE Administrator License expires on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
PACE administrators must purchase and maintain a surety bond (limits outlined in Table 1.1)
Step 2 – Request a NMLS Account
The Minnesota Residential PACE Administrator License application is submitted electronically through the Nationwide Multistate Licensing System (NMLS). To submit a license application, applicants must first request to obtain an NMLS account.
Step 3 – Complete the Application
All Minnesota Residential PACE Administrator License applications can be completed online through the NMLS. Applicants must complete the entire application, and submit the following items:
-
- Company financial statements for the last fiscal year
- Primary company and consumer complaint contact information
- Company business plan containing the following information:
- Marketing strategies
- Products
- Target markets
- Operating structure the applicant intends to employ
- Certificate of Good Standing
- Company staffing and internal policies
- The following document samples:
- PACE loan contract
- Right to rescind a contract
- Notice of rescission right and form
- Disclosure of important things to know about this loan
- Company formation documents
- Management chart showing the company’s hierarchy
- Organizational chart showing the company’s ownership structure
- Appointment of Commissioner of Commerce as Agent of Process
- Verification of experience
PACE administrators must pay a $1,000 fee when submitting their license application.
How Do Minnesota Residential PACE Administrators Renew Their License?
Residential PACE administrators can renew their license online through the NMLS. License holders need to simply login to their account to access their renewal application. The Minnesota Residential PACE Administrator License expires on December 31 of each year and must be renewed before the expiration date.
What are the Insurance Requirements for the Minnesota Residential PACE Administrator License?
Minnesota does not require residential PACE administrators to obtain any form of liability insurance as a prerequisite to obtaining a license. PACE administrators must purchase and maintain a surety bond (limits outlined in Table 1.1).
How Do Minnesota Residential PACE Administratora File Their Bond?
Residential PACE administrators should submit the completed bond form, including the power of attorney, electronically through the NMLS. The surety bond requires signatures from both the surety company that issues the bond and a representative from the lending company. The surety company should include the following information on the bond form:
- Legal name and NMLS number of entity/individual(s) buying the bond
- Surety company’s name
- Bond amount
- Date the bond goes into effect
- Date the bond is signed
What Can Minnesota Residential PACE Administrators Do to Avoid Claims Against Their Bond?
To avoid claims on their bond, residential PACE administrators in Minnesota must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Pay all required taxes and fees
- Honor all contractual obligations
What Other Insurance Products Can Agents Offer Residential PACE Administrators in Minnesota?
Minnesota does not require residential PACE administrators to purchase any form of liability insurance as a prerequisite to obtaining a license. However, most reputable businesses will seek to obtain this insurance anyway. Bonds are our only business at BondExchange, so we do not issue liability insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Minnesota Residential PACE Administrator Customers?
The NMLS conveniently provides a public database to search for active residential PACE administrators in Minnesota. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.
